Page 6 - FSUOGM Week 50 2021

FSUOGM COMMENTARY FSUOGM

the initial sanctions in response to any further eager to impose weighty sanctions on Moscow,
aggressive moves in Ukraine will be extremely its European allies may be more reluctant given
significant and isolating for Russia and for Rus- the state of the European gas market. Moscow
sian business and for the Russian people,” she could easily retaliate against any measures
said. imposed by its European customers by cut-
However, Biden appeared to retreat on what ting gas supplies, and even a relatively small
his administration was prepared to do in later decrease would have major ramifications for
comments, stating that “the idea that the US is prices.
going to unilaterally use force to confront Rus- Politics aside, though, there are justifiable
sia invading Ukraine is not on the cards right concerns of significant problems occurring with
now.” Yet some observers noted that the use of European gas supply this winter. Asia continues
the word “unilaterally” left the door open for the to swallow up the bulk of global LNG supply,
US to join other nations, perhaps Ukraine’s allies leaving little spare for European markets. And
in Eastern Europe such as Poland and the Baltic while Russia has been accused of keeping some
States, in confronting Russia militarily. supply back from the market to drive up prices,
evidence is mounting that Gazprom simply does
What next? not have the capacity to meet rising demand. It
Russia and the Putin leadership would have looks increasingly likely that domestic rival
little to gain from an offensive in Ukraine that Rosneft will soon get access to the European gas
would surely result in the country facing unprec- market, ending Gazprom’s monopoly. It is hard
edented economic isolation at a time when it is to imagine the Kremlin ever letting this happen
struggling to revive its economy in the wake of unless Gazprom really was unable to meet soar-
the coronavirus (COVID-19) pandemic. The ing demand in Europe on its own.
Russian electorate are also far more weary of Meanwhile, Europe has an alarmingly low
foreign interventions than they were at the time level of gas in storage for this time of year. Stor-
of Crimea’s annexation. They are far more con- age facilities in the EU and the UK were just
cerned with stagnating living standards in Rus- 62.8% full as of December 13, according to data
sia, which would surely be affected in the event published by Gas Infrastructure Europe, even
of further international sanctions. though there are several months of the winter
At the same time, while the US would be heating season left to come. ™

INVESTMENT

Amur GCC scores $9.1bn in loans

RUSSIA A major gas chemicals complex in the Far East further $6.5bn.
that Russia’s Sibur and China’s Sinopec want to Russia’s main state lender, Sberbank, said
The complex will use develop has secured $9.1bn in funding from separately it would furnish a $700mn loan, while
feedstock from gas Russian and international lenders, hopefully another government-owned bank, Gazprom-
supplies along the paving the way for a final investment decision bank, said it would provide $750mn.
Power of Siberia. (FID) to be taken on the delayed project. Sibur has been trying to advance Amur GCC
The Amur Gas Chemicals Complex (GCC) for a number of years, and seemingly had some
near Russia’s border with China will play an difficulty securing necessary investment. Diffi-
integral role in Sibur’s efforts to establish a sig- cult market conditions in Russia that followed the
nificant presence in Asian petrochemicals mar- country’s 2014 economic crisis did not help mat-
kets. The arrival of funding, which will cover the ters. There were also concerns about how quickly
lion’s share of the project’s $11bn cost, comes Gazprom would be able to develop the Amur gas
after Sibur closed a deal in December last year processing plant that will supply the complex with
to form a joint venture with Sinopec to take the feedstock. Work on that facility began in June.
project forward, transferring a 60% stake in the Sibur has been in talks with Sinopec on the
enterprise to the Chinese state company. project for at least seven years. But the Chinese
Once ready in 2024, the complex in the Amur company, which also owns a 10% stake in Sibur,
region is expected to produce 2.3mn tonnes per was initially reluctant to commit, given Beijing’s
year of polyethylene and 400,000 tpy of polypro- preference for investing in domestic petrochem-
pylene, using ethane and LPG that has been sep- icals capacity rather than projects overseas.
arated from gas on route to China via Gazprom’s Meanwhile, Sibur’s focus shifted to the Zapsib-
Power of Siberia pipeline. Most of those petro- neftekhim petrochemicals hub in Western Sibe-
chemicals products will be taken by Sinopec for ria, commissioned in late 2019.
distribution in China. The economics of Amur GCC were improved
According to Sibur, international banks are after the government decided earlier this year to
providing $2.6bn in loans to Amur GCC, with introduce a subsidy on ethane and LPG feed-
coverage extended by export credit agencies stock. Starting January 2022, the reverse excise
SACE of Italy and Euler Hermes of Germany. tax will amount to RUB9,000 ($121) per tonne
Chinese and Russian banks will contribute a of ethane and RUB4,500 per tonne for LPG. ™

P6 www. NEWSBASE .com Week 50 15•December•2021